More US home purchase deals fall through

WHEN pandemic lockdowns hit the US real estate industry, showings were halted, homes were yanked off the market, and municipal offices that process closing documents were shuttered. As a result, in March 2020, nearly 18 per cent of purchase contracts were cancelled — though it only took a few months to return to typical levels.

But in 2022, the frequency of cancelled deals has begun to rise again, reaching nearly 15 per cent in June — the highest rate since the pandemic peak, a recent report by real estate brokerage Redfin showed, representing about 60,000 failed home sales across the nation.

The likely culprit: rising mortgage interest rates. The journey from accepted bid to closing day can take to 2 months or more, and interest rates sometimes shift in the interim. Buyers can lock in rates for certain periods of time but not all do, and even a small increase can stretch monthly payments out of range and kill a deal. And this year’s rate increases were substantial. Consider, for example, that the average rate for a 30-year, fixed-rate mortgage rose from 3.79 per cent in January to 5.3 per cent in July. That change would increase a monthly payment by about US$90 for every US$100,000 borrowed.

The locations where the highest percentage of deals fell through in June — many in the south and south-west — are some of the most popular for buyers. In Las Vegas, just over 27 per cent of deals collapsed in June, the highest rate among all markets, according to Redfin. Favoured destinations in Florida followed, including Lakeland, just under 27 per cent, and Cape Coral, just under 26 per cent. NYTIMES